Offset Account for Every Expenditure?

Hi All!

I am still novice in sorting out all my bank transactions to get the best possible outcome to pay less interest on my PPR home loan.

I have a 100% offset account at variable 3.79% which I am more than happy with.
I bank with another institution where my pay goes in and take some out of that to add extra to my repayments.

My question is;

Shall I put all my employment earnings and just bank from this account as the interest gets calculated daily?

I am aware that some people have institutions where multiple offset accounts can be used against the mortgage which helps seperate your expenditure. However I believe if you are vigilant with your spendings, I am sure this would just be a common sense approach to knocking off any interest occurred over the duration of your loan. Even if it is a measly $10 to $100 a month. It all adds up because you had money in there and it is calculated daily.

My offset account does not have fees for making transactions. It is an annual account keeping fee of $299 which is frugal compared to the interest savings per year which do not get looked at by the ATO.

Please enlighten me. I bank with two institutions but believe consolidating with my Bank Lender because every rate is better than the Big Four that simply cannot match any my rates.

 

By getting your pay deposited elsewhere, and storing cash in another account you are costing yourself money. think of the compounding as well as the direct savings.

I see no reason why someone would have a savings account in addition to an offset account.

 

I take it your loan is with ING? There's nothing particularly special about their offset account, but you don't pay any ATM fees anywhere (I think ING even refunds the $2 fees that the independent ATMs charge you). That alone probably makes it better than most of the competition's offers.

If you put you salary into an offset account, you'd save roughly 1-2 years on the mortgage. Perhaps not a huge amount of money, but it's a saving for doing nothing different except changing your salary account. Effectively free money.

For some people, they tend to spend what ever is in their account. Keeping your spending account (where you're currently paid) separate from your savings account (your offset account) can help some people save more money. There are also ways around this though.

This really comes down to a question of saving a year or two vs how effectively you manage your money.

 

Thanks for the prompt reply Peter.

Correct! I am with ING and it all just stacks up for their basic loan and everyday account options. Their rebates for fees should be a norm across all banks. It's fair. Even their $0 Credit Card offers free international transactions. This is great for someone like me who travels a lot. (I do not work for ING)
Of course all these great savings will change in time but for now, it's simple.
I am very vigilant with my spending so wiping off any months off my mortgage because of my discipline is an option worthwhile for my strategy.

Cheers!

 

@mytwocents the $299 annual fee gives it away.

I definitely agree that banks should be facilitating free access to your money. They're the one's using it to their benefit in the meantime.

Keep in mind that you can also transfer funds to your loan redraw facility if it helps to have your savings 'out of sight, out of mind'. There may be tax implications if the property were to become an investment at some future point though.

 

The pertinent question is, how disciplined are you?

I tend to not think twice with my purchases. This can cause me to overspend and not even notice.

What I find works for me, is to keep my business/investment/personal accounts seperate.

Technically I can save a few dollars by shaving off some cents in my off-set account. Yet I found reality was I'd spend a few $$$ more than I planned to when I had direct access to this account.

I find the Barefoot Investor has a pretty good set-up.

Personally I have 3 personal accounts.
1. weekly expenses such as coffee and cake (splurge)
2. monthly expenses such as mobile, float tank, medicare, audible, netflix
3. date night account. Partner and I deposit straight to this once a month. No arguments over who's paying. When funds run out, it's date nights in till it fills up again.
4. travel funds are stored in my off-set account, however this is transferred onto a travel card so I only spend what I've budgeted.

I found this worked best for me, and knowing my level of discipline with spending.

If I were super disciplined, I would put it all in the off-set and save them penny's.

 

We use a double reward (flybuy) coles credit card for all transaction which get auto debited every month from offset account.
I see this Flybuy bonus points as hard cash as it can be converted to coles/kmart gift cards. Last years reward point gave us 1500$ spending money in coles/kmart/jbhifi

 

Hi @TheSackedWiggle , how much is the annual cost for that credit card?

 

I have 'Rewards master card',
it was free for first year then 99/yr and came with 100$ coles spend card (not sure if they still have the same offer),
2 flybuy per dollar spend, lot of bonus points if you have car/home insurance from coles/kmart (upto 8x rewards in some cases).

They also have zero fee card with only 1 pt = 1 dollar spend.